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Essential IR Insights Newsletter - February 2023

New Europe Property to merge with Rockcastle

New Europe Property Investments plc and Rockcastle Global Real Estate Co. Ltd. concluded a framework deal on Dec. 13 that involved a proposed combination of their businesses into a newly incorporated entity in the Isle of Man.

The proposed merger is expected to establish the largest listed real estate company in the Central and Eastern European region. The companies will merge into NEPI Rockcastle PLC through an effective share swap ratio of 4.5 existing Rockcastle shares for every 1 existing NEPI share, according to a news release.

By combining their portfolios, the merged entity will gain immediate exposure to a significant portfolio in Poland, which the companies have identified as the biggest and most liquid property market in the region.

The companies also hope that the move will bring them "a substantially enlarged market capitalization," along with a merger of their complementary portfolios. As of Dec. 14, New Europe Property and Rockcastle's market capitalization amounted to approximately 49.0 billion South African rand and 32.3 billion rand, respectively.

New Europe Property's total investment property portfolio was valued at approximately €2.2 billion as at Sept. 30, while Rockcastle's listed security portfolio attained a market value of US$1.83 billion as of the same day.

In terms of management, New Europe Property CEO Alexandru Morar and Rockcastle CEO Spiro Noussis will serve as co-CEOs of the merged entity, while Dan Pascariu will be appointed as an independent nonexecutive chairman. The merged business will appoint the remainder of its board of directors in due course but did not provide a time frame for the board constitution.

The merger remains subject to several conditions, including approval from all relevant competition authorities and shareholders.

Java Capital serves as New Europe Property's corporate adviser, with Clifford Chance Badea acting as the company's legal adviser and J.P. Morgan as an independent adviser, while Cliffe Dekker Hofmeyr is the South African legal adviser.

Rockcastle appointed Dentons as its legal adviser for the merger.

As of Dec. 13, US$1 was equivalent to 13.60 South African rand.